Heritage Foundation Index 2013

7/29/2019 Heritage Foundation Index 2013

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Terry Miller

Kim R. Holmes

Edwin J. FeulnerIn partnership with

2013 Index of

Economic FreedomPromoting Economic Opportunity and Prosperity

Highlights of the


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Highlights of the2013 Index of Economic Freedom

FIVE FREE

ECONOMIES

REGIONAL

LEADERS

Hong Kong

Asia-Pacific

Hong Kong

Singapore Australia New Zealand

Sub-SaharanAfrica

MauritiusLatin

America

ChileNorth

America

Canada

Switzerland

Europe

SwitzerlandMiddle East/North Africa

Bahrain

GREATER FREEDOM MEANS

GREATER PERFORMANCE

The 2013 Index of Economic Freedom, once

again, demonstrates that countries with

higher levels of economic freedom

substantially outperform others in:

Economic growth Per-capita incomes

Health care

Education

Protection of the environment

Reduction of poverty

Overall well-being

2013 INDEX SCORE

Health

Per CapitaIncome

Education

Environment

BIG GAINERS

Georgia had the biggest gain in economic

freedom in the 2013 Index. Five other

emerging countries have improved for five

consecutive years, totaling at least 3.5

points, upgrading their economic systems

despite the global economic crisis.

TWO NOTABLE LOSERS

Two previous economic freedom leaders

continue to decline. The United States and

Ireland have registered five consecutive

years of declining economic freedom, with

a cumulative score loss of 5 points or more

since 2008.

United Arab Emirates

Colombia

Jordan

Poland

Indonesia

8.5

7.4

6.3

5.7

3.7

Ireland

U.S. 76.0

75.7

MOREINSIDE


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Highlights of the2013 Index of Economic Freedom

CHANGING OF THE GUARD IN EUROPE

A significant realignment of European countries is underway in terms of economic freedom. Eight

countries recorded their highest economic freedom scores ever in the 2013 Index , while five

others have scores equal to or below their scores from nearly 20 years ago , when the Index

began recording economic freedom.

Russia

Sweden

Turkey

Ukraine

Finland

France

Spain

Norway

Poland

Italy

Germany

Belarus

Romania

UnitedKingdom

Latvia

Ireland

Austria

Serbia

Bulgaria

Greece

Hungary

Lithuania

Estonia

Portugal

Georgia

Croatia

Slovakia

CzechRepublic

Belgium

Moldova

Denmark

Switzerland

Albania

Armenia

Slovenia

Macedonia

Netherlands

Bosnia & HerzegovinaMontenegro

Cyprus

Luxembourg

Malta

Liechtenstein

BlackSea

Sea ofAzov Caspian

Sea

Free Mostly Free Moderately Free Mostly Unfree Repressed Not Ranked

Kosovo

Iceland

ECONOMIC FREEDOM: CHANGES SINCE 2012

PropertyRights

FreedomfromCorruption

FiscalFreedom

GovernmentSpending

BusinessFreedom

LaborFreedom

MonetaryFreedom

TradeFreedom

InvestmentFreedom

FinancialFreedom

RULE OF LAW

LIMITED

GOVERNMENT

REGULATORY

EFFICIENCY

OPEN

MARKETS

FREEDOM COMPONENT SCORES

Europe

North America

Sub-SaharanAfrica

Asia-Pacific

Middle East/North Africa

South and CentralAmerica/Caribbean

REGIONAL SCORES


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1 Hong Kong 89.3

2 Singapore 88.0

3 Australia 82.6

4 New Zealand 81.4

5 Switzerland 81.0

6 Canada 79.47 Chile 79.0

8 Mauritius 76.9

9 Denmark 76.1

10 United States 76.0

11 Ireland 75.7

12 Bahrain 75.5

13 Estonia 75.3

14 United Kingdom 74.8

15 Luxembourg 74.2

16 Finland 74.0

17 Netherlands 73.5

18 Sweden 72.919 Germany 72.8

20 Taiwan 72.7

21 Georgia 72.2

22 Lithuania 72.1

23 Iceland 72.1

24 Japan 71.8

25 Austria 71.8

26 Macau 71.7

27 Qatar 71.3

28 United Arab Emirates 71.1

29 Czech Republic 70.9

30 Botswana 70.6

31 Norway 70.5

32 Saint Lucia 70.4

33 Jordan 70.4

34 South Korea 70.3

35 The Bahamas 70.1

36 Uruguay 69.7

37 Colombia 69.6

38 Armenia 69.4

39 Barbados 69.3

40 Belgium 69.2

41 Cyprus 69.0

42 Slovakia 68.7

43 Macedonia 68.244 Peru 68.2

45 Oman 68.1

46 Spain 68.0

47 Malta 67.5

48 Hungary 67.3

49 Costa Rica 67.0

50 Mexico 67.0

51 Israel 66.9

52 Jamaica 66.8

53 El Salvador 66.7

54 Saint Vincentand The Grenadines

66.7

55 Latvia 66.5

56 Malaysia 66.1

57 Poland 66.0

58 Albania 65.2

59 Romania 65.1

60 Bulgaria 65.0

61 Thailand 64.1

62 France 64.1

63 Rwanda 64.1

64 Dominica 63.9

65 Cape Verde 63.7

66 Kuwait 63.1

67 Portugal 63.1

68 Kazakhstan 63.0

69 Turkey 62.9

70 Montenegro 62.6

71 Panama 62.5

72 Trinidad and Tobago 62.3

73 Madagascar 62.0

74 South Arica 61.8

75 Mongolia 61.7

76 Slovenia 61.7

77 Ghana 61.3

78 Croatia 61.3

79 Uganda 61.1

80 Paraguay 61.1

81 Sri Lanka 60.7

82 Saudi Arabia 60.683 Italy 60.6

84 Namibia 60.3

85 Guatemala 60.0

86 Burkina Faso 59.9

87 Dominican Republic 59.7

88 Azerbaijan 59.7

89 Kyrgyz Republic 59.6

90 Morocco 59.6

91 Lebanon 59.5

92 The Gambia 58.8

93 Zambia 58.7

94 Serbia 58.6

95 Cambodia 58.5

96 Honduras 58.4

97 Philippines 58.2

98 Tanzania 57.9

99 Gabon 57.8

100 Brazil 57.7

101 Benin 57.6

102 Belize 57.3

103 Bosnia and Herzegovina 57.3

104 Swaziland 57.2

105 Fiji 57.2

106 Samoa 57.1

107 Tunisia 57.0108 Indonesia 56.9

109 Vanuatu 56.6

110 Nicaragua 56.6

111 Mali 56.4

112 Tonga 56.0

113 Yemen 55.9

114 Kenya 55.9

115 Moldova 55.5

116 Senegal 55.5

117 Greece 55.4

118 Malawi 55.3

119 India 55.2

120 Nigeria 55.1

121 Pakistan 55.1

122 Bhutan 55.0

123 Mozambique 55.0

124 Seychelles 54.9

125 Egypt 54.8

126 Cte dIvoire 54.1

127 Djibouti 53.9

128 Niger 53.9

129 Guyana 53.8

130 Papua New Guinea 53.6

131 Tajikistan 53.4

132 Bangladesh 52.6

133 Cameroon 52.3

134 Mauritania 52.3

135 Suriname 52.0136 China 51.9

137 Guinea 51.2

138 Guinea-Bissau 51.1

139 Russia 51.1

140 Vietnam 51.0

141 Nepal 50.4

142 Central Arican Republic 50.4

143 Micronesia 50.1

144 Laos 50.1

145 Algeria 49.6

146 Ethiopia 49.4

147 Liberia 49.3148 Burundi 49.0

149 Maldives 49.0

150 Togo 48.8

151 Sierra Leone 48.3

152 Haiti 48.1

153 So Tom and Prncipe 48.0

154 Belarus 48.0

155 Lesotho 47.9

156 Bolivia 47.9

157 Comoros 47.5

158 Angola 47.3

159 Ecuador 46.9

160 Argentina 46.7

161 Ukraine 46.3

162 Uzbekistan 46.0

163 Kiribati 45.9

164 Chad 45.2

165 Solomon Islands 45.0

166 Timor-Leste 43.7

167 Congo, Rep. o 43.5

168 Iran 43.2

169 Turkmenistan 42.6

170 Equatorial Guinea 42.3

171 Congo, Dem. Rep. o 39.6

172 Burma 39.2173 Eritrea 36.3

174 Venezuela 36.1

175 Zimbabwe 28.6

176 Cuba 28.5

177 North Korea 1.5

N/A Aghanistan N/A

N/A Iraq N/A

N/A Kosovo N/A

N/A Libya N/A

N/A Liechtenstein N/A

N/A Somalia N/A

N/A Sudan N/A

N/A Syria N/A

Rank Conr Overll Score Rank Conr Overll Score Rank Conr Overll Score

049.9 REPRESSED

ECONOMIC FREEDOM SCORE

5059.9 MOSTLY UNFREE

6069.9 MODERATELY FREE

7079.9 MOSTLY FREE

80100 FREE

2013 INDEx Of ECONOMIC fREEDOM COuNtRy RaNkINgS


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2 Highlights of the 2013 Index of Economic Freedom

are Colombia, Indonesia, Jor-

dan, Poland, and the United Arab

Emirates.

Every region continues to be repre-

sented by at least one of the top 20freest economies, but some notable

reshuffling has occurred in the

2013Index.

EcOnOmic LEadErs

in dEcLinE

The overall stagnation observedin worldwide levels of economic

freedom has coincided with signifi-

cant setbacks in countries previously

regarded as leaders in economic free-

dom. In particular, the

United States and Ireland,

which had risen in previ-

ous years as high as fourth

place in the rankings, have

seen their scores drop sub-stantially in recent years.

Both suffered declines in

economic freedom again

this year.

Seventy-eight coun-

tries registered declines

i n e c o n o m i c f r e e do m

in the 2013 Index, and

another eight recorded nochange in overall score. It

remains to be seen wheth-

er the global economy is

undergoing the leading

edge of a fundamental

realignment of countries

along the continuum of

economic freedom or

whether the breaks inprogress in many coun-

tries are just transitory

manifestations of a loss of

commitment to advanc-

ing economic freedom.

LimitEd GOvErnmEnt

EnhancEs EcOnOmic

dynamism

A pleasant surprise in the Index

rankings this year was the strong evi-

dence that many countries are put-

ting substantial effort into getting

their fiscal houses in order. TheIndex

category that measures restraint in

government spending showed one of

the largest improvements of any ofthe 10 economic freedoms, with the

worldwide average score rising from

59.8 to 61.1. Fiscal freedom improved

as well, with many countries continu-

Source: 2013 Index of Economic Freedom.

Chart 2 heritage.org

Higher Government SpendingEquals Lower Economic Growth

%

%

%

%

%

%

%

%

%

%

%

%

%

Change in GDP, 20082011

Change in Government Spendingas a Percentage of GDP, 20082011

Trend Line,AdvancedEconomies

Trend Line,DevelopingEconomies


7/18

The Heritage Foundation | heritage.org/index 3

ing efforts to streamline tax systems

and lower marginal rates.

Three years of data are now avail-

able on the impact of government

stimulus on economic growth rates.

The 2011Indexfirst reported the neg-ative impact of government spending

in the early days of the global reces-

sion for advanced economies that

are members of the Organisation for

Economic Cooperation and Develop-

ment (OECD). The full data set now

available for a much greater number

of countries shows a similar negative

relationship between increases ingovernment spending and economic

growth.

Interestingly, the relationship

is far more negative in the case of

advanced economies than it is for

developing and emerging economies

(correlation coefficient 0.46 ver-

sus 0.09). Over the past three years,

countries that have increased govern-ment spending have tended to record

lower economic growth rates.

markEt-OpEninG mEasurEs

cOntinuE, but rEGuLatOry

EFFiciEncy dEcLinEs

The economic freedom category

that improved the most in the 2013Index is investment freedom. Aver-

age scores in this category increased

to 52.2 from 50.7 in the 2012 Index.

Countries clearly continue to rec-

ognize the benefits of integrating as

fully as possible into global economic

markets.

Regulatory efficiency, by contrast,

declined significantly. Average scoresdropped in every economic freedom

related to regulatory efficiency, with

labor freedom suffering the most.

Many countries apparently believe

that improvements in well-being

for poorer workers can be achieved

through legislative fiat. Even top-

ranked Hong Kong has experimented

with a minimum wage, and labor mar-

ket rigidities and bureaucratic andcostly business regulations continue

to drive many people into informal

types of economic activity, particu-

larly in developing countries.

thE ruLE OF Law

The 2013 In dex focuses on the

impact on economic growth andsocial well-being of the rule of law,

one of the four pillars of economic

freedom. The five essays included

in a Special Focus Section provide a

comprehensive overview of the sub-

ject. Measures in the Indexrelated to

the rule of law include indices related

to the protection of property rights

and corruption, and the compositeof these two indicators is even more

highly correlated than overall eco-

nomic freedom scores with high lev-

els of per capita GDP. Those countries

that have improved the rule of law

over the past five years show an aver-

age growth rate of 4.4 percent over

the period, while those economies

where the rule of law has declinedhave grown less than 3 percent per

year on average.

Not surprisingly, the rule-of-law

indicators are highly correlated with

high levels of investment and job

growth. Their impact is more striking

within the developing and emerging

countries than it is for more advanced

economies (coefficient of correlation0.70 versus 0.53), perhaps because

there is more variability in scores

among the developing and emerging

countries. TheIndexthus regards the


8/18


rule of law as a foundational aspect

of economic freedom, essential for

achieving economic progress and

societal prosperity.

EcOnOmic FrEEdOm

and prOspErity

The results of the 2013Indexrein-

force the conclusion that advancing

economic freedom in the areas of

rule of law, limited government, regu-

latory efficiency, and open markets

is the most effective way to generate

broad-based economic dynamism,

creating more opportunities for peo-ple to work, higher levels of produc-

tivity, and gains from market opening

and trade that elevate prosperity and

reduce human poverty. This multi-

dimensional relationship between

economic freedom and true human

progress has been empirically docu-

mented in theIndexover the past 19

years, and other similar studies have

confirmed its findings.

The most basic benefit of eco-nomic freedom, confirmed now with

data covering 19 years, is the strong

relationship between economic free-

dom and levels of per capita income.

For countries that achieve scores

that reflect even moderate levels

of economic freedom (60 or above),

the relationship between economic

freedom and per capita GDP is high-ly significant. Countries moving up

the economic freedom scale show

increasingly high levels of average

income.

Source: 2013 Index of Economic Freedom. heritage.orgChart 3

Economic Freedom Promotes Prosperity

Five Freest Countries

Five Least Free Countries

GDP per Capita(Purchasing Power Parity)

Asia-Pacific

Middle East/North Africa

Europe Americas Sub-SaharanAfrica

$43,140$41,577

$35,848 $35,403

$7,459$5,357

$7,732

$13,723

$8,948

$5,093


9/18


Given the strength and empiri-cal durability of the relationship

between higher levels of economic

freedom and greater prosperity, it can

only be regarded as a human tragedy

that the majority of the worlds peo-

ple still live in countries where eco-

nomic freedom is either repressed or

heavily regulated.

The governments of China andIndia bear a special responsibility in

this regard. The policy environments

that they set for economic activity

affect the lives of more than 2.5 bil-

lion people. Both economies are con-sidered mostly unfree.

Greater levels of economic free-

dom have had a major positive impact

on poverty levels over the past decade.

Based on the United Nations Multidi-

mensional Poverty Index, the inten-

sity of poverty in countries whose

economies are considered mostly free

or moderately free is only one-fourththe level in countries that are rated

less free. Poverty rates have declined

more significantly in freer countries

as well.

Overall Score in the 2013 Index of Economic Freedom

Correlation: 0.66R = 0.44

Tren

dLine

China

India

60 or less: Mostly

Unfree or Repressed

Source: 2013 Index of Economic Freedom. Chart 4 heritage.org


Asian Giants Lag in Economic Freedom

Each circle represents a nation inthe Index of Economic Freedom

500

250100

10

Population(millions)


10/18


11/18


induced by high levels of economic

freedom, the higher growth rates

spurred by advances in economic

freedom tend to inspire a virtuous

cycle of openness and resilience, trig-

gering even further improvementsin economic freedom. The result is

a sort of compounding that has cre-

ated in the countries with the high-

est levels of economic freedom a level

of prosperity and human well-being

unmatched in human history.

Greater economic freedom also

provides more fertile ground for

effective and democratic governance.It empowers people to exercise

greater control of their daily lives. By

increasing options, economic free-

dom ultimately nurtures political

reform as well. Economic freedom

makes it possible for individuals to

gain the economic resources neces-

sary to challenge entrenched inter-

ests or compete for political power,thereby encouraging the creation of

more pluralistic societies.

timE tO rEnEw cOmmitmEnt

tO EcOnOmic FrEEdOm

The current period of uncertain

and fragile global economic perfor-

mance represents a critical oppor-tunity to ponder the principles that

can revitalize economic growth. The

results of the 2013Index of Economic

Freedom document economic policy

stagnation in many countries around

the world and record a general

decline in the momentum for increas-

ing freedom. If we are to restore eco-

nomic growth, that decline is going tohave to be reversed, most importantly

in countries like the United States

and Ireland that once led the charge

for greater freedom.

As Fr iedrich A. Hay ek on ce

observed, If old truths are to retain

their hold on mens minds, they must

be restated in the language and con-

cepts of successive generations. That

need has never been more evident tothose who carry on the fight for great-

er economic freedom and the broader

understanding and acceptance of the

fundamental principles on which

prosperity is based.


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13/18


was explored in depth in research byDr. Robert J. Barro that was published

in the 2000 Index of Economic Free-

dom. In a groundbreaking chapter, Dr.

Barro was among the first to question

the relationship between the promo-

tion of democracy and development,

highlighting the practical differences

between democracy and the more gen-

eral concept of rule of law and conclud-ing that rule of law, by empowering

individuals within a stable and predict-

able environment, is the more reliable

factor in promoting development.

Dr. Barro returns to the Indexthis

year with an updated version of that

study based on improved data and

new research. His conclusion, how-

ever, is the same: Efforts to promotethe rule of law can bear substantial

fruit in promoting development; pro-

motion of democracy, by contrast, is

uncertain at best in spurring econom-

ic growth or laying a solid foundationfor economic freedom.

At a time when the Middle East

is in turmoil, with political systems

in rapid evolution or even revolu-

tion, Barros study provides a solid

basis on which to evaluate the likely

success of attempts by aid donors to

support greater levels of freedom and

broad-based economic developmentthroughout the region.

EquitabLE trEatmEnt

undEr thE Law

In developing countries, advances

in the rule of law often involve such

basics as the implementation of con-

stitutional legal frameworks, landtitling procedures, and the struggle

against petty corruption. In advanced

economies, corruption often takes

more subtle forms, involving special



Property RightsScore

Freedom fromCorruption Score

Rule of LawScore

Correlation: 0.76

R = 0.58

Correlation: 0.80

R = 0.64

Correlation: 0.79

R = 0.62

The Eective Rule of Law Propels Prosperity

Trend Lines


14/18


subsidies or tax privileges for elites,

abuses of government contract-

ing, cronyism, and selective bailouts.

These, of course, exist also in devel-

oping countries. Indeed, such govern-ment-granted special privileges tend

to exist any time the government

claims a significant economic role,

either as property holder, business

operator, or regulator or through pro-

grams aimed at redistributing wealth.

Such policies and practices vio-

late one of the three principles of

economic freedom: equitable treat-ment for all. As emphasized in the

Index, in free societies, individuals

succeed or fail based on their effort

and ability, not on their connections

or class. Openness and transparency

are the greatest antidotes to discrimi-

nation, but they are among the most

difficult goals to achieve in govern-

ment, where secrecy and bureaucracyenable corruption and graft.

In the second study in this section,

Dr. Matthew Mitchell surveys the

range of corrupt government prac-

tices involving special privileges for

government-favored individuals or

groups and highlights the economic

costs they impose on society.

Next, James M. Roberts andJohn A. Robinson weigh in with a

contribution analyzing the specific

vulnerabilities of societies endowed

with significant natural resources,


Stronger Rule of Law Boosts Foreign Investment,Lowers Unemployment

Rule of Law Scores

FirstQuartile

SecondQuartile

ThirdQuartile

FourthQuartile

$328.6

$69.9

$33.0$20.4

Inflow of Foreign DirectInvestment, in Billions ofU.S. Dollars

FirstQuartile

SecondQuartile

ThirdQuartile

FourthQuartile

6.0%

7.0%

10.0% 10.1%

Unemployment Ratefor OECD Countries


15/18


especially minerals such as oil or

diamonds. Through a comparison of

countries that have handled the so-

called resource curse either especially

well or especially poorly, they identify

the policies and legal systems mostconducive to successful management

and exploitation of natural resourc-

es. It turns out that strong property

rights are the best cure for the curse.

thE ruLE OF Law:

GOOd FOr businEss

T h e f r e e - m a r k e t e c o n o m y depends on an open, competitive

environment with a level playing field.

Governments proper role is to refer-

ee the competition. When it abandons

its neutrality, either through outright

corruption or through misguided

efforts at social engineering that

involve picking an economys winners

and losers, the predictable results area loss of efficiency, a reduction in

productivity, and eventual economic

stagnation. Entrepreneurs have little

chance of success if government is

tipping the scales against them in

favor of vested interests. It is a fact

of life that already established firms,

not tomorrows innovators, are first

in line at the government trough.To close out this special section,

theIndexpresents an essay by Myron

Brilliant of the U.S. Chamber of Com-

merce, who argues that sustainable

business success is impossible with-

out the rule of law, which provides

market predictability and due pro-

cess. For Brilliant, good governance

is good business, and he urges greaterefforts to develop new and better

indicators to measure the effective-

ness of the rule of law and guide firms

investment decisions.

Indeed, the effort to identify

better measures of the rule of law

is a critical concern for everyone

engaged in comparative studies of

economic freedom. Of the four pil-

lars of economic freedom evaluatedin the Index of Economic Freedom ,

the rule of law is by far the most dif-

ficult to measure. There are few stan-

dard metrics, and most published

attempts to quantify and compare

the rule of law in various countries

rely on opinion surveys that can be

subjective and unreliable.

To mitigate such deficiencies, theIndex draws on an unusually wide

variet y of sources in evaluating

respect for property rights, including

information from international orga-

nizations, government sources, busi-

nesses, research organizations, and

the media. Undoubtedly, better met-

rics would enable even better under-

standing and analysis.

thE FOundatiOn

OF EcOnOmic FrEEdOm

and GrOwth

The rule of law, especially for

developing countries, may be the

area of economic freedom that is

most important in laying the foun-dations for economic growth, and in

advanced economies, deviations from

the rule of law may be the first signs

of serious problems that will lead to

economic decline.

There is plenty of evidence from

around the world that the rule of law

is a critical factor in empowering indi-

viduals, ending discrimination, andenhancing competition. In the never-

ending struggle to improve the human

condition and achieve greater prosper-

ity, policies that promote the rule of


16/18


law may well deserve a claim of prece-

dence over other desirable objectives.

The first and most important role

of governments is to preserve the

peace while simultaneously respect-

ing human rights, dignity, and free-dom. It is the rule of law that enables

peaceful resolution of conflict and

ensures integrity in governments

interactions with individuals. The

studies in this special section repre-

sent an effort to better understand,

measure, and promote this key aspectof economic freedom.

Business Freedom

Labor Freedom

Monetary Freedom

REGULATORY

EFFICIENCY

LIMITED

GOVERNMENT

Fiscal Freedom

Government Spending

RULE OF LAW Property Rights

Freedom from Corruption

OPEN

MARKETS

Trade Freedom

Investment Freedom

Financial Freedom

43.4

40.6

77.2

61.1

64.6

60.6

73.7

74.5

52.2

48.8

The rule of law continues to be undermined by political instability, particularly in the Middle

East and North Africa. Corruption has worsened in some countries as state interference ineconomic activity has grown, and perceptions of corruption in Europe and the South

America/Caribbean region have increased significantly. Respect for property rights declined

in 16 countries; only nine countries improved their property rights scores.

Despite the challenging economic and political environments, tax-system reform has

progressed, and the growth of government spending was at least marginally restrained in anumber of countries. The average top individual income tax rate is 28.4 percent, and the

average top corporate tax rate is 24.3 percent. The average overall tax burden as a percentage

of GDP is 22.4 percent, and average government spending as a share of GDP is 35.1 percent.

While some countries have continued to streamline and modernize their business frame-works, reforms have stalled in many others, seemingly as a result of some combination of

reform fatigue and complacency. For the world as a whole, labor freedom has declined

significantly. In a large number of countries, increases in the minimum wage have exceeded

labor productivity growth. Inflationary pressures have inched up around the world.

Trade freedom remained essentially unchanged, with little apparent momentum for further

liberalization. Investment freedom improved substantially as many countries sought to ease

the foreign investment process. Progress in financial freedom was largely stagnant, reflecting

a lack of reform in developing countries and uncertainty in advanced economies. The global

financial system remains highly vulnerable to the ongoing European sovereign debt crisis.

The Ten Economic Freedoms: A Global Look


17/18

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month worldwide. WSJ.com is the agship site oThe Wall Street JournalDigital Network,

which also includes MarketWatch.com, Barrons.com, AllThingsD.com, and FINS.com and

SmartMoney.com. TheJournalholds 34 Pulitzer Prizes or outstanding journalism, and, in

2012, was ranked No. 1 in BtoBs Media Power 50 or the 13th consecutive year.


18/18

Free

Freedom Category in the 2013 Index of Economic Freedom

Mostly Free Moderately Free Mostly Unfree Repressed

$44,488

$35,228

$15,822

$5,475 $5,462

Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: TheHeritage Foundati on and Dow Jones & Company, Inc., 2013), http://www.herit age.org/in dex, and InternationalMonetary Fund, World Economic Outlook Databases, http://www.imf.org/external/ns/cs.aspx?id=28 (accessedNovember 6, 2012).

Chart 3 heritage.org

GDP per Capita (Purchasing Power Parity)

Greater Economic Freedom, Higher Standard of Living

Sources: Terry Miller, Kim R. Holmes, and Edwin J. Feulner, 2013 Index of Economic Freedom (Washington, D.C.: TheHeritage Founda tion and Dow Jones & Company, Inc., 2013), http://www.herit age.org/in dex; J.W. Emerson, A. Hsu,M.A. Levy, A. de Sherbinin, V. Mara, D.C. Esty, and M. Jaiteh, 2012 Environmental Performance Index and Pilot TrendEnvironmental Performance Index (New Haven: Yale Center for Environmental Law and Policy, 2012),http://epi.yale.edu/downlo ads (accessed November 7, 2012); and United Nations, Human Development reports,http://hdr.undp.org /en/reports (accessed November 7, 2012).

Chart 5 heritag e.org

Variables Calibrated to 0-to-1 Scale

Overall Score in 2013 Index of Economic Freedom

Four Clear Trends: Economic Freedom Is Key to Overall Well-Being

Health

Per Capita Income

Education

Environment

ThisgraphicshowstrendlinesforfourvariablesrelatedtothequalityoflifeandeconomicfreedomTogethertheypresentacleartrendnationswithmoreeconomicfreedomenjoygreateroverallwell-beingThefirstthreetrendsarefromtheUNsHumanDevelopmentreportsthefourthisfromYaleUniversitysEnvironmentalPerformanceIndex

For almost two decades, The Heritage Foundation has partnered with The Wall Street

Journalto measure the impact o liberty and the ree market around the world, producing

the annualIndex of Economic Freedom.

TheIndexdemonstrates the strong connection between prosperity and economic

reedom, with metrics related to government spending, trade reedom, and the rule o law.

Updated economic reedom data or 185 economies

More than 30 all-new charts and maps

Foreword and Preace rom Wall Street JournalEditorial Page Editor Paul A. Gigot

and Heritage Foundation President Dr. Edwin J. Feulner

Analysis rom leading researchers, including Harvard Universitys Dr. Robert Barro

New special section dedicated to the Rule o Law

Online tools, like customized comparison charts and an interactive heat map

Te Heritage Foundation 214 Massachusetts Avenue, NE Washington, DC 20002 heritage.org

Economic Freedom Promotes Prosperity

Heritage.org/Index

Documents

Heritage Foundation Index 2013